House and Senate push for student debt relief

Thursday, March 19, 2015

Borrowers paying off their student loans may see lower interest rates under separate bills filed by U.S. Sen. Elizabeth Warren (D-MA) and Rep. Joe Courtney (D-Conn). Separate legislation introduced in the House and Senate this week would allow students with high-interest loans to refinance at lower rates.

Senator Warren filed a similar bill last year, but it was blocked by Senate Republicans, who said it didn't do enough to lower education costs or reduce borrowing. Warren explained that some students are paying off undergraduate loans with interest rates of 7% or more. Her bill (S.793) would allow borrowers to refinance to about 3.9%, the current government-subsidized rate Congress passed in 2013. The costs would be paid for via higher taxes on top earners.

“A problem that was bad a year ago has gotten worse,” Warren said in her announcement. "The federal loans produce obscene profits for the federal government and the biggest banks on the private side.”

The House bill (H.R.1434), sponsored by Rep. Courtney, would allow borrowers with public or private student loans to refinance through the Department of Education. For undergraduates, the new rate would be 3.8%; for graduate students, it would drop to 5.4%; and for PLUS loans, the figure would be 6.4%.

"This issue is front and center in terms of the worries the middle class has about whether or not they're going to be able to see their younger children succeed and hopefully surpass their parents in terms of thriving and growing in the U.S. economy," Courtney said.

Student loan debt jumped to $1.3 trillion in 2014 from $1.2 trillion, an increase of $100 billion in one year, according to data from the Federal Reserve System. There were roughly a million additional borrowers in 2014 compared with the previous year, according to figures from the Department of Education, and nearly a million more borrowers have fallen behind on their student loans in the last year.

Congressional Democrats have embraced reducing student debt since Warren first introduced her bill. Earlier this month, President Obama introduced the Student Aid Bill of Rights and made the issue the centerpiece of his weekly radio address: “Higher education is, more than ever, the surest ticket to the middle class,” Obama said. “But just when it’s never been more important, it’s also never been more expensive.”